Ariz. Elec. Power Coop., Inc. v. DJL 2007 LLC, 1 CA-CV 16-0097

• Court: Court of Appeals of Arizona
• Writing for the Court: CATTANI, Judge
• Citation: 246 Ariz. 534,443 P.3d 24
• Parties: ARIZONA ELECTRIC POWER COOPERATIVE, INC., Plaintiff/Appellee/Cross-Appellant, v. DJL 2007 LLC, an Arizona limited liability company; DJL Enterprises, LLC, an Arizona limited liability company; East Coast Investor Group 535, LLC, a Delaware limited liability company; Mark G. Knorr and Carol A. Knorr, husband and wife; Silver Creek Land Co., LLC, an Arizona limited liability company; and Michael Suda, a married man as his sole and separate property; Donald Suda, a married man as his sole and separate property, Defendants/Appellants/Cross-Appellees. Mohave Electric Cooperative, Incorporated, an Arizona Electric Cooperative Non-Profit Membership Corporation, Intervenor/Appellee/Cross-Appellant.
• Docket Number: No. 1 CA-CV 16-0097,1 CA-CV 16-0097
• Decision Date: 09 May 2019

246 Ariz. 534
443 P.3d 24

ARIZONA ELECTRIC POWER COOPERATIVE, INC., Plaintiff/Appellee/Cross-Appellant,
v.
DJL 2007 LLC, an Arizona limited liability company; DJL Enterprises, LLC, an Arizona limited liability company; East Coast Investor Group 535, LLC, a Delaware limited liability company; Mark G. Knorr and Carol A. Knorr, husband and wife; Silver Creek Land Co., LLC, an Arizona limited liability company; and Michael Suda, a married man as his sole and separate property; Donald Suda, a married man as his sole and separate property, Defendants/Appellants/Cross-Appellees.

Mohave Electric Cooperative, Incorporated, an Arizona Electric Cooperative Non-Profit Membership Corporation, Intervenor/Appellee/Cross-Appellant.

No. 1 CA-CV 16-0097

Court of Appeals of Arizona, Division 1.

FILED May 9, 2019

Gust Rosenfeld, PLC, Phoenix, By Charles W. Wirken, Jennings Strouss & Salmon, PLC, Phoenix, By Christopher W. Kramer, Co-Counsel for Plaintiff/Appellee/Cross-Appellant

Zeitlin & Zeitlin, PC, Phoenix, By Dale S. Zeitlin, Counsel for Defendants/Appellants/Cross-Appellees

The Law Offices of Larry K. Udall, PLLC, Chandler, By Larry K. Udall, Counsel for Intervenor/Appellee/Cross-Appellant

Presiding Judge Kent E. Cattani delivered the opinion of the Court, in which Judge Jon W. Thompson and Judge Paul J. McMurdie joined.

CATTANI, Judge:

¶1 Both sides in these consolidated condemnation cases appeal from the superior court’s rulings (1) fixing a valuation date for purposes of calculating just compensation for a right of way for electric transmission lines and (2) determining the ownership of existing support structures and transmission lines within the right of way. We affirm the court’s ruling as to ownership of the existing structures and transmission lines, but we reverse the ruling as to valuation date. Under the right-of-way clause of Article 2, Section 17 of the Arizona Constitution, a private corporation with statutory eminent domain authority cannot effect a taking (which establishes the valuation date) by simply occupying property. Instead, the taking occurs only after the jury determines damages and the private corporation pays full compensation. Because the superior court chose a pre-taking valuation date, we reverse and remand for further proceedings consistent with this decision.

FACTS AND PROCEDURAL BACKGROUND

¶2 On May 15, 1981, the United States Department of the Interior, Bureau of Land Management ("BLM"), granted a 30-year right of way to Arizona Electric Power Cooperative, Inc., across public lands in Mohave County for use as an easement for 69kV electric transmission lines. Both 69kV and 230kV transmission lines were built within the right of way.

¶3 By 1990, the BLM had transferred title to the property subject to the right of way into private hands. DJL 2007 LLC, DJL Enterprises LLC, East Coast Investor Group 535, LLC, Mark and Carol Knorr, Silver Creek Land Co., Michael Suda, and Donald Suda (collectively, "Landowners") are the current owners of the relevant parcels. Southwest Transmission Cooperative, Inc.,¹

443 P.3d 27

as a successor in interest, obtained Arizona Electric Power’s interest in the right of way in the early 2000s, and Southwest Transmission sold the 69kV line to Mohave Electric Cooperative, Inc., a few years later.

¶4 The BLM right-of-way grant expired on May 14, 2011. But Southwest Transmission and Mohave Electric continued to operate the transmission lines thereafter, and in January 2013, Landowners sent Southwest Transmission a letter alleging that it was trespassing.

¶5 Southwest Transmission is a nonprofit electric generation and transmission cooperative corporation under Title 10, Chapter 19, Article 4 of the Arizona Revised Statutes ("A.R.S.") and, as such, has statutory authority to exercise the power of eminent domain for purposes of maintaining or operating electric transmission lines. See A.R.S. § 10-2127(A)(11) ; see also A.R.S. § 12-1111(10). Accordingly, in January 2014, Southwest Transmission filed these eminent domain actions to condemn rights of way for the transmission lines. Mohave Electric intervened as the owner of one of the transmission lines.

¶6 The superior court ruled that Southwest Transmission was not entitled to an order of immediate possession under A.R.S. § 12-1116. Instead, recognizing the practical reality that Southwest Transmission would need to continue to operate, maintain, and repair the lines during the pendency of the condemnation proceedings, the court entered a preliminary injunction allowing ongoing access to and operation of the lines.

¶7 Landowners then moved the court to determine the valuation date for purposes of calculating just compensation to be paid for the property subject to condemnation. Landowners argued that the land should be valued as of the date the court eventually enters the final order of condemnation. Southwest Transmission countered that the land should be valued as of May 15, 2011, the date it remained in possession immediately following expiration of the BLM right-of-way grant. After briefing and oral argument, the court adopted a middle ground, ruling that the valuation date would be January 15, 2014: the date the summons issued in the condemnation suit. The court further ruled that Landowners would be entitled to rental damages from expiration of the grant to the summons date, and that interest would accrue from the valuation date on the amount of compensation ultimately awarded. The court denied Landowners’ subsequent motion for reconsideration.

¶8 The parties then filed cross-motions for partial summary judgment concerning ownership of the transmission lines and support structures, which would determine whether just compensation for the taking includes the value of those improvements or just of the underlying real property interest. The superior court ruled in favor of Southwest Transmission, finding no indication that title to the improvements had passed to Landowners.

¶9 At the parties’ request, the superior court then entered a partial final judgment related to the two issues (valuation date and ownership of the improvements). See Ariz. R. Civ. P. 54(b). Landowners timely appealed, and Southwest Transmission and Mohave Electric timely cross-appealed.

¶10 This court initially dismissed the appeal for lack of appellate jurisdiction under A.R.S. § 12-2101(A)(1) (appeal from final judgment), noting that the judgment was not subject to Rule 54(b) certification because it did not resolve any claims of any of the parties. See Ariz. R. Civ. P. 54(b) ; Musa v. Adrian , 130 Ariz. 311, 313, 636 P.2d 89, 91 (1981). The Arizona Supreme Court then granted Landowners’ petition for review and remanded to this court to consider whether appellate jurisdiction existed under A.R.S. § 12-2101(A)(6). See Bilke v. State , 206 Ariz. 462, 466, ¶ 16, 80 P.3d 269, 273 (2003).

¶11 A.R.S. § 12-2101(A)(6) authorizes appeal "[f]rom an interlocutory judgment that determines the rights of the parties and directs an accounting or other proceeding to determine the amount of the recovery." But a right to appeal from such an interlocutory judgment is not automatic; instead, the superior court has discretion to determine whether an immediate appeal should be available. See Bilke , 206 Ariz. at 466–67, ¶¶ 20–21, 80 P.3d at 273–74. To do so, the superior court must make two distinct findings: first, whether the ruling as

443 P.3d 28

to the rights of the parties is final, and second, whether amount of recovery is indeed the only issue remaining. See id. at 467–68, ¶¶ 21, 23, 28, 80 P.3d at 274–75 ; see also Ciena Capital Funding, LLC v. Krieg’s, Inc. , 242 Ariz. 212, 215–16, ¶ 7, 394 P.3d 39, 42–43 (App. 2017). Although the superior court’s Rule 54(b) certification satisfied the finality prong, see Bilke , 206 Ariz. at 467, ¶ 23, 80 P.3d at 274, the parties had not requested and the superior court had not made the requisite discretionary finding "expressly direct[ing] that the only issue remaining is the amount of recovery." See id. at 468, ¶ 28, 80 P.3d at 275. Accordingly, we stayed the appeal and revested the superior court with jurisdiction to determine whether (A)(6) certification was appropriate. The superior court did so, and we now have jurisdiction under A.R.S. § 12-2101(A)(6).

DISCUSSION

I. Valuation Date.

¶12 The superior court ruled that Southwest Transmission lacked authority to condemn property simply by occupying it (a "taking by occupation"), so Southwest Transmission and Mohave Electric were holdover tenants between expiration of the BLM right-of-way grant and the date of the taking, and Landowners would be entitled to rental damages for that period. The court further reasoned that Southwest Transmission became an agent of the state for condemnation purposes when it filed the direct condemnation action, see A.R.S. § 12-1115(C), at which point the taking occurred because the government (through Southwest Transmission) was in actual physical possession of the property.

¶13 Although the parties agree that the valuation date must reflect the date of the taking, both sides challenge the court’s determination of the valuation date. Southwest Transmission (joined by Mohave Electric)...